Rand in recovery mode as recession shock eases

JOHANNESBURG – South Africa’s rand continued to recover early on Friday as a narrowing of the current account deficit helped ease some of the shock of the economy tripping into recession, while profit-taking on the recent slump also aided the currency.

At 0640 GMT the rand was 0.75 percent firmer at 15.2200 per dollar, having reached a session-best 15.1550.

After second quarter gross domestic product data on Tuesday showing the economy had shrunk 0.7 percent knocked more than 4 percent off the rand, it has steadied, triggering some short-covering as sellers looked to close positions.

South Africa’s current account deficit narrowed to 3.3 percent of GDP in the second quarter from 4.6 percent, and although that was followed by a statement from Moody’s warning the recession was credit-negative, the data sparked some significant rand demand. Currency strategists see a relief period ahead for the rand and fellow emerging markets following the sharp sell-off in August. Employment data from the United States due later in the session is seen keeping dollar bulls at bay.

Bonds were also in recovery mode, with the yield on the benchmark government paper due in 2026 down 3 basis points to 9.16 percent. – Reuters